Norms For Politically-Exposed Persons : RBI
The Reserve Bank of India (RBI) recently updated Know Your Customer (KYC) norms for politically exposed persons (PEPs) who transact with regulated entities (REs), seeking to comply with the recommendations of the Financial Action Task Force (FATF).
- In the amended KYC master direction, the central bank defines PEPs as “individuals who are or have been entrusted with prominent public functions by a foreign country, including the heads of states/governments, senior politicians, senior government or judicial or military officers, senior executives of state-owned corporations, and important political party officials”.
- REs have the option of establishing a relationship with PEPs (whether as customers or beneficial owners).
- REs have to perform regular customer due diligence and also follow additional conditions prescribed by the RBI to transact with PEPs.
- Some additional conditions include establishing an appropriate risk management system to determine whether the customer or the beneficial owner is a PEP.
- REs have to take reasonable measures to establish the source of funds/ wealth.
- They also need to get approval from senior management to open an account for a PEP.